Accountancy · Ch 12 — Final Accounts of Sole Proprietors – I
Trading Account
Trading Account
Trading Account
Meaning: the first part of the Final Accounts, prepared to find out the Gross Profit (or Gross Loss) — the profit earned purely from BUYING and SELLING goods, before considering any other operating expenses or incomes.
Format:
| Dr. Trading Account for the year ended 31st March 20XX | ₹ | Cr. | ₹ |
|---|---|---|---|
| To Opening Stock | XXX | By Sales | XXX |
| To Purchases | XXX | Less: Sales Returns | (XXX) |
| Less: Purchase Returns | (XXX) | XXX | |
| To Direct Expenses (Wages, Carriage Inward, Freight, Octroi, etc.) | XXX | By Closing Stock | XXX |
| To Gross Profit c/d (transferred to P&L A/c) | XXX | ||
| Total | XXX | Total | XXX |
Items on the debit side: Opening Stock, Net Purchases (Purchases less Purchase Returns), and all direct expenses — expenses directly connected with bringing goods into the business and making them ready for sale (wages of factory/godown workers, carriage inward/freight on purchases, octroi, import duty, etc.).
Items on the credit side: Net Sales (Sales less Sales Returns) and Closing Stock (valued at cost or market price, whichever is lower). …
The first part of Final Accounts, matching net sales and closing stock against opening stock, net purchases, and direct expenses, to arrive at G …
The profit earned purely from buying and selling goods, before considering indirect/operating expenses …